Money and Investing (formerly Pfizer Stock prices)
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I requested and got some info from them. The 99 Retirement Tips was actually ok and there are some items applicable to younger people. Was it visionary — nope but ok.
The Fisher Investments Difference was useless. For example there was a section titled Our Fees Are Fair and You'll Know What They Are had one kinda important omission IMHO — no mention of the fee amounts and structure.
I was contacted by a guy by phone and he offered to evaluate my portfolio. I await his response.BTW, fees are rather steep, 1.25% on 1st 1M, slightly less (I think like 1.125) on next 5M.
Looks like they are stock pickers and market timers, both of which IMHO, are not possible to succeed in the long run as a basis for a portfolio.
Should be interesting to hear his comments.
Stay tuned.
The Fisher Investments Difference was useless. For example there was a section titled Our Fees Are Fair and You'll Know What They Are had one kinda important omission IMHO — no mention of the fee amounts and structure.
I was contacted by a guy by phone and he offered to evaluate my portfolio. I await his response.BTW, fees are rather steep, 1.25% on 1st 1M, slightly less (I think like 1.125) on next 5M.
Looks like they are stock pickers and market timers, both of which IMHO, are not possible to succeed in the long run as a basis for a portfolio.
Should be interesting to hear his comments.
Stay tuned.
Fisher is a joke. I was recruited to work for them years ago. They say a lot about being in the clients side but they’re no different from a fee stand point than any other fee based schedule at a wire house or independent advisor. They use cookie cutter models and claim to customize, but they don’t. It’s all marketing with zero substance.
Wire house firms usually refers to Merrill, UBS, Morgan Stanley, Well Fargo. The firms like Stifel and Oppenheimer are regional wire houses. Then you have independent firms like Raymond James, Ameriprise, LPL and Commonwealth. And the the RIA world which is totally independent fee based Advisors who clear through Schwab or Fidelity etc. the Wire House Advisors are not fiduciaries where as the RIA world are 100% fiduciaries. There been an industry fight for years to make this a well known distinction and the DOL Fiduciary rule in 2016 would have.
My take on annuities is that everyone should have a percentage of their retirement income in such. And the majority of retires do — it's called social security. The current thinking is instead of taking SS when eligible such that you minimize the flow out of retirement savings and investments, that you withdraw $ from retirement savings and investments and take SS later at age 70 thus maximizing payout for life. In addition SS has somewhat of an idex up due to inflation — I'm not sure the standard annuities being sold do. For example, my pension has no adjustments for inflation, so if inflation goes similar to what it did in the 70's, perhaps in 10 years I;ll be able to buy a hamburger and fries one day a month with my monthly pension check.
As far as advice from you insurance guy : Warren Buffet once said “Don't ask the barber whether you need a haircut”
Note that unless your FA doesn't get paid based on the amount of assets he manages, he also has a financial axe to grind if you divert some of those investment $ to purchase an annuity.
As far as advice from you insurance guy : Warren Buffet once said “Don't ask the barber whether you need a haircut”
Note that unless your FA doesn't get paid based on the amount of assets he manages, he also has a financial axe to grind if you divert some of those investment $ to purchase an annuity.
Your insurance guy wants the commission and your FA doesn’t understand the product, that much i can guarantee.
Annuities ONLY work if you use them for the benefits you need. So I set my father up with one because he was an independent business owner and wanted a steady stream of income. So before retirement he was able to get a guaranteed growth of 7% or the market return, stepped up guarantee withdrawal balance every year, for 10 years, and then a guaranteed income stream for life with a return of principal at death, or contract value, whichever higher. Now, fees are stupid high in these vehicles, BUT….fees come out of actual account value not the stepped up withdrawal value. Sooooooo, if you hold this annuities and use it for all its benefits, you’re never actually paying any fees because you get the principal back in the end, plus all the income for life!
Now, the real issue is that 99.9999% of insurance brokers and Financial Advisors will sell you a product and convince you to flip in 3 years because there’s some new amazing benefit you just have to have. So you end up having paid tons of fees and are usually no better off. And most sellers get paid up to 7% up front commission to move these products.
Annuities ONLY work if you use them for the benefits you need. So I set my father up with one because he was an independent business owner and wanted a steady stream of income. So before retirement he was able to get a guaranteed growth of 7% or the market return, stepped up guarantee withdrawal balance every year, for 10 years, and then a guaranteed income stream for life with a return of principal at death, or contract value, whichever higher. Now, fees are stupid high in these vehicles, BUT….fees come out of actual account value not the stepped up withdrawal value. Sooooooo, if you hold this annuities and use it for all its benefits, you’re never actually paying any fees because you get the principal back in the end, plus all the income for life!
Now, the real issue is that 99.9999% of insurance brokers and Financial Advisors will sell you a product and convince you to flip in 3 years because there’s some new amazing benefit you just have to have. So you end up having paid tons of fees and are usually no better off. And most sellers get paid up to 7% up front commission to move these products.
Here is how I understand business:
1. The price a business must charge for a product is equal to the costs (to the business) to produce the product plus profit.
2. The costs to produce an annuity is the present value of all the payouts (a function of actuary data and projected costs of money, admin , commissions and profit).
Ergo, the payout rate of the annuity is related to the commission and thus implicitly paid by the buyer of the annuity. All things being equal, the lower the commission the higher the payout.
1. The price a business must charge for a product is equal to the costs (to the business) to produce the product plus profit.
2. The costs to produce an annuity is the present value of all the payouts (a function of actuary data and projected costs of money, admin , commissions and profit).
Ergo, the payout rate of the annuity is related to the commission and thus implicitly paid by the buyer of the annuity. All things being equal, the lower the commission the higher the payout.
Ty
I do not have one…
My initial question was based on a couple of ideas/scenarios
-Assuming one has enough money to retire ( based on current assets, invested in equities/bonds/cash)
- Understanding that reducing equity exposure to minimal percentages ( based on 25 year asset draw) does not make sense ( inflation, etc)
- Believing that we are due for a 10-20% correction and not wanting to see portfolio drop
Is there such an Annuity that would allow me to earn a guaranteed 6-7% a year, returning full principal at death to estate, with the understanding that I could not touch proceeds for 5-10 years ( fees built in)
Do my thoughts make sense?
I do not have one…
My initial question was based on a couple of ideas/scenarios
-Assuming one has enough money to retire ( based on current assets, invested in equities/bonds/cash)
- Understanding that reducing equity exposure to minimal percentages ( based on 25 year asset draw) does not make sense ( inflation, etc)
- Believing that we are due for a 10-20% correction and not wanting to see portfolio drop
Is there such an Annuity that would allow me to earn a guaranteed 6-7% a year, returning full principal at death to estate, with the understanding that I could not touch proceeds for 5-10 years ( fees built in)
Do my thoughts make sense?
First and foremost an annuity is an insurance product. You will pay a premium to protect against an undesirable outcome.
No different than fire insurance on your house. You are willing to pay each year just incase the house burns down. If it doest burn down do you say to yourself damn I wasted money all those years? No because those premiums gave you comfort of knowing your protected and you only know they were not needed after the fact in hindsight .
What does the annuity insure against ? Longevity.. risk you live too long and run out of money. The annuity keeps on paying after all the money is gone. Just like the house burning this is highly unlikely ..
The best way to do this is by example.. The type of annuity you seem to be asking about is one with income benefits . A more appropriate name is deferred annuity.
Lets say you put 1mm in one which has a 7% "return" ...
Note there are 2 tracks .. the market value that fluctuates with market and the income base. The 7% refers to income base. Its not real money but its a metric to help determine how much income you'll get in future . The base rolls up at 7% each yr. SIMPLE interest not compounded. So in roughly 15 yrs its doubled.
Lets say in yr 15 you want to draw income. You will get 7% of the greater of the market value or income base.
So if the market did great and compounded net of high 3% fees at a rate of say 8% then the market value will be 3mm +
So you will get 7% of 3mm or 210k per yr until death. Note if market did poor and its value was only 500k in 15 yrs then you'd get 7% off the income base which rolled up to 2mm. So in this case 140k a yr. The income base serves no more purpose at this point. Again its not real money , just a metric to determine income .
Lets stop here to discuss market value. My example shows 8% net of 3% fees. Much of that 3% fee is the insurance premium embedded.
Lets say instead of annuity you put the 1mm in an index fund with no fee. Then you'd of gotten 11%. Your account would be 4.8mm.
So if you took the same 210k income from the 4.8mm each year it will last much longer than the annuities 3mm. Chances are you will die before the 4.88mm is gone so the annuity was a poor choice. You of been better in index fund.
Getting back to annuity.. your estate gets the better of original premium of 1mm LESS WITHDRAWALS or market value. So if you live 10 yrs and take 210k a yr estate gets whatever is left of market value. Those withdraws deplete the market value. If you live a long time then market value may be depleted and they get nothing.
Lets do am example of a poor market. Your 1mm annuity investment goes down to 500k in 15 yrs.. The income based has rolled up to the 2mm so your income is 7% of 2mm or 140k.. The 140k comes out of market value which in a poor market will get depleted soon enough.
But no worry since the insurance company will keep paying the 140k until death . This is why you paid those high fees which are high so the embedded insurance premium is paid.
So only buy the annuity if you want the insurance protection I discuss.
There are may permutations on different products but I covered the framework .
Note terms are much more generous outside of NYS since NYS regulators are very conservative.